Bank of Japan Governor Hints at Possible Upward Revision of Inflation Forecast - Suggests Further Rate Hikes

Bank of Japan Governor Kazuo Ueda recently stated at a press conference that he would consider revising upward the future inflation outlook. This is interpreted as leaving open the possibility of further interest rate hikes if upward pressure on prices intensifies.

Governor Ueda said, "If the current inflation outlook rises or the upside risks increase significantly, we will adjust interest rates more quickly." The recent sustained weakening of the yen has led to rising import prices, and there is a recognition that this needs to be carefully monitored.

In fact, the yen/dollar exchange rate reached the 155 yen level at one point last month, which was a major factor in the Japanese government and the Bank of Japan intervening for the first time in 32 years. Governor Ueda emphasized that "the impact of exchange rate fluctuations on prices has increased compared to the past" and that the government will closely monitor the weakening yen trend in cooperation with the government.

Meanwhile, while avoiding specific mention of the timing of further interest rate hikes, he made it clear that if prices rise significantly above initial forecasts, the Bank of Japan will take the initiative to raise interest rates. However, he added that rapid increases would be avoided.

Meanwhile, he stated that the BOJ would maintain an accommodative monetary environment until the price stability target is achieved. This signifies that the current policy interest rate of 0.0-0.1% will continue, and that the BOJ intends to proceed cautiously with rate hikes.

The Bank of Japan raised interest rates in March, but it has repeatedly emphasized its intention to maintain an accommodative monetary policy stance even after abolishing negative interest rates. While some market participants believe that further rate hikes are imminent this year, Governor Ueda's remarks suggest a gradual approach.